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Middle East Product Tanker Freight Costs Hit Six-Year High

June 17, 2015 at 08:17 by Michelle Wiese Bockmann in Tanker and Oil Industry

Freight costs to transport middle distillates to Europe from the Middle East Gulf on Long Range 2 tankers have reached the highest levels since at least 2009, as new refineries boost shipments of diesel, amid higher demand for the vessels in the lead up to Ramadan in the region.

Middle East Product Tanker Freight Costs Hit Six-Year High

So-called lump-sum rates to ship 90,000-ton cargoes on the LR2 ships on the route to Europe are now around $2.9 million, shipbrokers told OPIS. That translates to around $32.22 per metric ton, a price at which arbitrage trades for jet fuel and diesel are likely unprofitable at current spot prices in Europe for the middle distillates.

The daily rate for LR2 tankers shipping from Kuwait to Rotterdam averaged $29,514 daily for the week ending June 5, according to data from London-based Clarksons, the world's largest shipbroker. That's the highest rate seen in weekly data going back to 2009.

The daily rate for LR2 tankers shipping from Kuwait to Rotterdam averaged $29,514 daily for the week ending June 5, according to data from London-based Clarksons, the world's largest shipbroker. That's the highest rate seen in weekly data going back to 2009.

Additional jet and diesel cargoes booked from Total, a minority shareholder in the 18-month-old Saudi Satorp refinery, plus the startup of the expanded Ruwais refinery in the United Arab Emirates are understood to have helped limit LR2 availability in the region. However problems with the expanded Ruwais refinery may have capped demand, also expected to wane when the Ramadan religious holiday begin next week.

The Middle East countries of Kuwait and Saudi Arabia are the two largest exporters of jet fuel to Europe.

Middle East Product Tanker Freight Costs Hit Six-Year High

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